Sample Business Contracts

Employment Forms

Employment Agreement. Employers can customize an employment agreement that states the salary, benefits, working hours and other important provisions for their new or existing employee.

Consulting Agreement. Answer simple questions to build a contract with a consultant. Specify the services rendered, when payment is due, as well as IP rights.

Commission Agreement. Employers who compensate their sales employees based on commissions can prepare an agreement to reduce misunderstandings by specifying the base salary and how commissions are calculated.

Executive Employment Agreement. Companies may offer their business executives a contract that is different from the one provided to their regular employees. Executive employment agreements may be more complex because the compensation structure may include a combination of salary and commissions, provide for bonuses based on sales, stock or other financial targets, and include non-compete, confidentiality and severance provisions.

Sales Representative Contract. Independent sales representatives offer companies the potential to increase the sale of products or services without the burden of increasing headcount. Both parties should understand how commissions are calculated, when commissions will be paid, as well as how the representative will treat confidential information from the company and whether the representative may also sell a competing line of products or services.

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EXECUTIVE EMPLOYMENT AGREEMENT
AGREEMENT dated as of June 29, 2001 between InSight Health Services Corp., a
Delaware corporation ("Company"), and Michael A. Boylan ("Executive"). InSight
Health Services Holdings Corp., a Delaware corporation ("Parent") is a party to
this Agreement solely for the purposes of Section 3.07.
Company wishes to employ Executive, and Executive wishes to accept such
employment, in each case subject to the terms and conditions hereof.
Accordingly, Company and Executive hereby agree as follows:
I. TERM
Commencing at the Effective Time (as defined below), Executive is to be employed
by Company for rolling twelve (12) month periods, whereby Executive's term of
employment is twelve (12) months on a continuing basis, unless earlier
terminated in accordance with Article IV below.
II. EMPLOYMENT
SECTION 2.01 EMPLOYMENT BY COMPANY. Company, for itself and its subsidiaries and
affiliates, employs Executive for the term of this Agreement to render full time
services as Company's Executive Vice President - Operations and in such other
capacities as the Board of Directors of Company ("Board") may assign and, in
connection therewith, to perform such duties as are reasonably consistent with
Executive's position and as the Board shall direct. Executive agrees to perform
such duties as are reasonably consistent with the duties normally pertaining to
the office to which Executive has been elected or appointed, subject always to
the direction of the Board. Subject to Section 5.01 hereof, Executive's
expenditure of reasonable amounts of time for personal business, charitable or
professional activities will not be deemed a breach of Executive's undertaking
to provide full time services hereunder, provided that such activities do not
interfere materially with Executive's rendering of such services.
SECTION 2.02 ACCEPTANCE OF EMPLOYMENT BY EXECUTIVE. Executive accepts such
employment and shall render the services required by this Agreement to be
rendered by Executive. Executive shall also serve on request during all or any
part of the term of this Agreement as an officer of Company and of any of its
subsidiaries or affiliates without any compensation therefor other than as
specified in this Agreement.
SECTION 2.03 PLACE OF EMPLOYMENT. Executive's principal place of employment
shall be located at 220 Gibraltar, Suite 205, Horsham, Pennsylvania 19044. In
the event that the principal place of employment of Executive is relocated to a
site that is more than 50 miles from Executive's principal residence, subject to
Section 4.05(a) hereof, Company may require Executive to relocate Executive's
principal residence to within 50 miles of such site. Notwithstanding the
foregoing, Executive acknowledges that the duties to be performed by
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Executive hereunder are such that Executive may be required to travel
extensively, principally within the United States, in connection with Company's
Business (as defined below).
III. COMPENSATION
SECTION 3.01 SALARY, BONUSES, LIFE INSURANCE. As compensation for the services
to be rendered pursuant to this Agreement, Company shall pay Executive, and
Executive shall accept, a salary of $210,000.00 per annum ("Annual Salary"),
payable in accordance with the payroll policies of Company for senior executives
as from time to time in effect, less such amounts as may be required to be
withheld by applicable federal, state and local law and regulations (the
"Payroll Policies").
In addition to the Annual Salary, Executive shall be eligible to receive
and Company shall pay (a) a discretionary bonus of up to 75% of the Annual
Salary if Company achieves the goals set forth in a budget prepared by Company
management and adopted or approved by the Board; and (b) a discretionary bonus
of up to an additional 25% of the Annual Salary upon the achievement of other
goals mutually agreed upon by Executive and the President and Chief Executive
Officer of Company and approved by the Board. Such bonuses are payable on the
earlier to occur of the date Company's (i) annual report on Form 10-K is filed
with the Securities and Exchange Commission ("SEC") for such year and (ii)
year-end audit has been completed for such year.
Company shall purchase and maintain in full force and effect at all times
during the term of this Agreement a policy of term insurance on the life of
Executive payable to such beneficiary or beneficiaries as Executive may
designate in an amount equal to three (3) times the amount of the Annual Salary;
provided Executive shall comply with the issuing insurance company's
requirements for issuance of the policy.
SECTION 3.02 PERFORMANCE REVIEW. Executive's performance shall be reviewed and
evaluated by the Board annually during the term of this Agreement.
SECTION 3.03 PARTICIPATION IN EMPLOYEE BENEFIT PLANS. Executive shall be
entitled during the term of this Agreement, if and to the extent eligible, to
participate in any life insurance, medical, health and accident and disability
plan or program, pension plan or similar benefit plan of Company, which may be
available to senior executives of Company generally, on the same terms as such
other executives.
SECTION 3.04 EXPENSES. Subject to such policies as may from time to time be
established by Company for senior executives of Company generally, Company shall
pay or reimburse Executive for all reasonable business expenses actually
incurred or paid by Executive during the term of this Agreement in the
performance by Executive of services under this Agreement, upon presentation of
expense statements or vouchers or such other supporting information as Company
may reasonably require.
SECTION 3.05 AUTOMOBILE ALLOWANCE. Company shall pay Executive $750 per month
and all reasonable expenses of operating an automobile subject to such policies
as may from time to time be established and amended by Company.
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SECTION 3.06 VACATION. Executive shall be entitled to four (4) weeks of paid
vacation each year during the term of this Agreement, which Executive may
accumulate up to eight (8) weeks, to be taken at a time or times which do not
unreasonably interfere with Executive's duties hereunder.
SECTION 3.07 STOCK OPTIONS. Parent shall grant stock options to Executive,
pursuant to the terms of the Stock Option Agreement substantially in the form of
Exhibit A, to purchase shares of Parent common stock in an amount to be
determined by the President and Chief Executive Officer of Company and approved
by the board of directors of Parent. The stock options granted by Parent to
Executive shall be part of the total available pool of options, which shall
equal 10% of the fully diluted common stock of Parent as of the Effective Time.
The exercise price of the stock options shall be the price per share that
subscribing stockholders pay to Parent as of the Effective Time in connection
with their subscription of Parent common stock.
IV. TERMINATION
SECTION 4.01 TERMINATION UPON DEATH. If Executive dies during the term of this
Agreement, this Agreement shall terminate as of the date of Executive's death.
SECTION 4.02 TERMINATION UPON DISABILITY. Executive's employment may be
terminated by Company due to Executive's permanent and total disability (within
the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended) ("Disability"), so that Executive is unable substantially to perform
Executive's services required by this Agreement to be rendered by Executive for
(i) a period of three (3) consecutive months or (ii) for shorter periods
aggregating three (3) months during any twelve (12) month period. Company may,
at any time after the last day of the three (3) consecutive months of Disability
or the day on which the shorter periods of Disability equal an aggregate of
three (3) months, by 30 days' written notice to Executive, terminate this
Agreement and Executive's employment hereunder. Any such determination of
Disability shall be made by a physician chosen by a majority of the members of
the Board in its sole and unfettered discretion. Nothing in this Section 4.02
shall be deemed to extend the term of this Agreement or of Executive's
employment hereunder, beyond the term specified in Article I hereof.
SECTION 4.03 TERMINATION FOR CAUSE. If the Board decides that Cause (as defined
below) exists, it may remove Executive for Cause and terminate this Agreement
and the term of Executive's employment hereunder on the date specified in
written notice to Executive. If terminated for Cause, Executive shall have no
right to receive any monetary compensation or benefit hereunder with respect to
any period after the date specified in such notice. Such notice may also
terminate Executive's right to enter Company's premises. For purposes of this
Agreement, the term "Cause" means any of the following:
(a) Executive has been convicted or pled guilty or no contest to any
crime or offense (other than any crime or offense relating to the operation of a
motor vehicle) which is likely to have a material adverse impact on the business
operations or financial or other condition of Company, or any felony offense;
(b) Executive has committed fraud or embezzlement;
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(c) Executive has breached any of Executive's obligations under this
Agreement and Executive has failed to cure the breach within 30 business days
following receipt of written notice of such breach from Company;
(d) Company, after reasonable investigation, finds that Executive has
violated material written policies and procedures of Company, including but not
necessarily limited to, policies and procedures pertaining to harassment and
discrimination;
(e) Executive has failed to obey a specific written direction from the
Board (unless such specific written instruction represents an illegal act),
provided that (i) such failure continues for a period of 30 business days after
receipt of such specific written direction, and (ii) such specific written
direction includes a statement that the failure to comply therewith will be a
basis for termination hereunder; or
(f) any willful act or omission on Executive's part which is materially
injurious to the financial condition or business reputation of Company or any of
its subsidiaries.
SECTION 4.04 TERMINATION IN DISCRETION OF COMPANY. Company may, at any time
thereafter by 30 days' written notice to Executive, terminate this Agreement and
the term of Executive's employment hereunder, and Executive thereafter shall
have only such rights to receive monetary compensation or benefits hereunder in
respect of any period after the effective date of termination as are provided in
Section 4.07 hereof. Such notice may also terminate Executive's right to enter
Company's premises.
SECTION 4.05 VOLUNTARY TERMINATION FOR GOOD REASON. Executive shall have the
right, effective upon 60 days' written notice to Company, to terminate
Executive's employment for Good Reason (as defined below), whereupon Executive
shall become entitled to receive compensation as provided in Section 4.07
hereof. For purposes of this Agreement, "Good Reason" means any of the
following:
(a) the movement by Company, without Executive's consent, of Executive's
principal place of employment to a site that is more than 50 miles from
Executive's principal residence;
(b) a reduction by Company, without Executive's consent, in Executive's
Annual Salary, duties and responsibilities, and title, as they may exist from
time to time; or
(c) a failure by Company to comply with any material provisions of this
Agreement which has not been cured within 30 days after notice of such
noncompliance has been given by Executive to Company, or if such failure is not
capable of being cured in such time, for which a cure shall not have been
diligently initiated by Company within the 30 day period.
SECTION 4.06 VOLUNTARY TERMINATION WITHOUT GOOD REASON. Executive shall have the
right to terminate this Agreement upon 60 days' written notice to Company and,
upon such termination, Executive shall not have the right to receive any
monetary compensation or benefit hereunder with respect to any period after the
date specified in such notice.
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SECTION 4.07 COMPENSATION ON TERMINATION.
(a) If the term of Executive's employment hereunder is terminated
pursuant to Section 4.01 hereof, Company shall pay to the executors or
administrators of Executive's estate or Executive's heirs or legatees (as the
case may be) all compensation accrued and unpaid up to the date of Executive's
death.
(b) If the term of Executive's employment hereunder is terminated
pursuant to Section 4.02, 4.04, 4.05, or 4.07(c) hereof, Company shall (i) pay
to Executive all compensation accrued and unpaid up to the effective date of
termination; (ii) pay to Executive additional compensation in an amount equal to
twelve (12) months of compensation at the Annual Salary rate then in effect,
payable in accordance with the Payroll Policies; and (iii) maintain, at
Company's expense, in full force and effect, for Executive's continued benefit
until the earlier of (x) twelve (12) months after the effective date of
termination or (y) commencement of Executive's benefits pursuant to full time
employment with a new employer under such employer's standard benefits program,
all life insurance, medical, health and accident, and disability plans or
programs, in which Executive was entitled to participate immediately prior to
the effective date of termination; provided, that Executive's continued
participation is permissible under the general terms and provisions of such
plans or programs and provided further, that Company shall be entitled to amend
or terminate any employee benefit plans which are applicable generally to
Company's employees. In the event that Executive's participation in any such
plan or program is prohibited, Company shall arrange to provide Executive with
benefits substantially similar to those which Executive was entitled to receive
under such plans or programs. Any amounts paid by Company to Executive under (i)
and (ii) above may be reduced, in the case of termination pursuant to Section
4.02, by the amount which Executive is entitled to receive under the terms of
Company's long-term disability insurance policy for senior executives as and if
in effect at the effective date of termination. Any payments made pursuant to
this Section 4.07 shall be reduced by such amounts as are required by law to be
withheld or deducted.
(c) Notwithstanding any provision herein to the contrary, if Executive
is terminated by Company without Cause, or Executive terminates his employment
for Good Reason, within twelve (12) months of a Change in Control (as defined
herein) which occurs after the Effective Time, Executive shall be entitled to
the payments and benefits set forth in Section 4.07(b). For purposes hereof, a
"Change in Control" shall be deemed to have occurred if (i) any person, or any
two or more persons acting as a group, and all affiliates of such person or
persons (a "Group"), who prior to such time beneficially owned less than 50% of
the then outstanding capital stock of Company or Parent, shall acquire shares of
Company's or Parent's capital stock in one or more transactions or series of
transactions, including by merger, and after such transaction or transactions
such person or group and affiliates beneficially own 50% or more of Company's or
Parent's outstanding capital stock, or (ii) Company or Parent shall sell all or
substantially all of its assets to any Group which, immediately prior to the
time of such transaction, beneficially owned less than 50% of the then
outstanding capital stock of Company or Parent.
(d) The compensation rights provided for Executive in this Section 4.07
shall be Executive's sole and exclusive remedies with respect to Section 4.01,
4.02, 4.04, 4.05, or 4.07(c) hereof, and Executive, the executors or
administrators of Executive's estate or Executive's heirs
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or legatees (as the case may be) shall not be entitled to any other
compensation, damages or relief in connection therewith.
V. CERTAIN COVENANTS OF EXECUTIVE
SECTION 5.01 COVENANTS AGAINST UNFAIR COMPETITION.
(a) ACKNOWLEDGMENTS. Executive acknowledges that, as of the date hereof
(i) the principal business of Company and its affiliates is the provision of
diagnostic imaging, treatment and related management services through a network
of mobile magnetic resonance imaging ("MRI") and positron emission tomography
("PET") facilities, fixed-site MRI and PET facilities and multi-modality
centers, at times, together with other healthcare providers, utilizing the
related equipment and computer programs and "software" and various corporate
investment structures ("Company Business"); (ii) Company Business is primarily
national in scope; (iii) the industry is highly competitive; and (iv)
Executive's duties hereunder will cause Executive to have access to and be
entrusted with various trade secrets not readily available to the public or
competitors, consisting of business accounts, lists of customers and other
business contacts, information concerning Company's relationships with actual or
potential clients or customers and the needs or requirements of such clients or
customers, budgets, business and financial plans, employee lists, financial
information, artwork, designs, graphics, marketing plans and techniques,
business strategy and development, know-how or other matters connected with
Company Business, computer software programs and specifications (some of which
may be developed in part by Executive under this Agreement), which items are
owned exclusively by Company and used in the operation of Company Business
("Trade Secrets"). Notwithstanding the foregoing, the parties agree that the
term "Trade Secrets" shall not include information which (i) is or becomes
generally available to the public, without violation of any obligation of
confidentiality by Executive, (ii) is or becomes available from a third party on
a nonconfidential basis, provided that such third party is not bound by a
confidentiality agreement concerning the Trade Secrets and (iii) is or has been
independently acquired or developed by Executive without violating the
provisions of this Section.
Executive further acknowledges that the Trade Secrets will be disclosed to
Executive or obtained by Executive and received in confidence and trust for the
sole purpose of using the same for the sole benefit of Company Business.
Executive also acknowledges that such Trade Secrets are valuable to Company, of
a unique and special nature, and important to Company in competing in the
marketplace.
During and after the term of this Agreement (otherwise than in the
performance of this Agreement), without Company's prior written consent,
Executive shall not divulge or use all or any of the Trade Secrets to or for any
person or entity except (i) for the benefit of Company and as necessary to
perform Executive's services under this Agreement; and (ii) when required by
law, and then only after consultation with Company or unless such information is
in the public domain. In the event that Executive, becomes or is legally
compelled (whether by deposition, interrogatories, request for documents,
subpoena, civil investigative demand or similar process) to disclose any Trade
Secrets, Executive shall provide Company with prompt, prior written notice of
such requirement so that Company may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this Section.
Executive agrees that his obligations under this Section 5.01 shall be absolute
and unconditional.
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(b) BREACH. Executive understands and agrees that Executive's employment
with Company may be terminated if Executive breaches this Agreement or in any
way divulges such Trade Secrets. Executive further understands and agrees that
Company may be irreparably harmed by any violation or threatened violation of
this Agreement and, therefore, Company may be entitled to injunctive relief to
enforce any of the provisions contained herein.
(c) NON-COMPETE. During the period of Executive's employment, Executive
will not directly or indirectly either as an employee, employer, consultant,
agent, principal, partner, stockholder, corporate officer, director, or in any
other individual or representative capacity, engage or participate in any
activity or business which Company shall determine in good faith to be in
competition in any substantial way with Company Business within any metropolitan
area in the United States or elsewhere in which Company is then engaged in
Company Business. The parties acknowledge that in California and some states
post-employment non-compete clauses may be generally unenforceable, but that
other states and jurisdictions permit such agreements. Executive hereby agrees
that Executive will not directly or indirectly, either as an employee, employer,
consultant, agent, principal, partner, stockholder, corporate officer, director,
or in any other individual or representative capacity, engage or participate in
any activity or business which Company shall determine in good faith to be in
competition in any substantial way with Company Business as conducted at the
effective date of termination of Executive's employment by Company for or a
period of twelve (12) months after the termination of Executive's employment and
that this Section will be enforceable to the greatest extent of the law.
(d) NO SOLICITATION OF EMPLOYEES. During Executive's employment and for
a period of twelve (12) months after the termination of Executive's employment,
Executive will not, either directly or indirectly, either alone or in concert
with others, solicit or entice or participate in the solicitation or attempt to
solicit or in any manner encourage employees of Company to leave Company or work
for anyone that is in competition in any substantial way with Company Business
(which in the case of the period following Executive's termination, shall mean
Company Business as conducted as of the effective date of termination of
Executive's employment with Company); provided, however, that the public
listing, advertising or posting of an available position shall not constitute
solicitation or an attempt to solicit hereunder and this subsection (d) shall
not preclude Executive from hiring an individual pursuant thereto.
(e) NO SOLICITATION OF CUSTOMERS. Executive will not during the course
of Executive's employment, or for twelve (12) months thereafter, either directly
or indirectly call on, solicit, or take away, or attempt to call on, solicit or
take away any of Company's customers on behalf of any business that is in
competition in any substantial way with Company. Executive promises and agrees
not to engage in any unfair competition with Company. During Executive's
employment, Executive agrees not to plan or otherwise take any preliminary
steps, either alone or in concert with others, to set up or engage in any
business enterprise that would be in competition with Company Business. In the
event of the termination of Executive's employment and for a period of twelve
(12) months thereafter, Executive will not accept any employment or engage in
any activities which Company shall determine in good faith to be competitive
with Company, if the fulfillment of the duties of the competitive employment or
activities would inherently require Executive to reveal Trade Secrets to which
Executive has access or learned during Executive's employment on behalf of any
business that is in competition in any substantial way with Company.
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(f) RETURN OF COMPANY PROPERTY. In the event of the termination of
Executive's employment, Executive will deliver to Company all devices, records,
sketches, reports, proposals, files, customer lists, mailing or contact lists,
correspondence, computer tapes, discs and design and other document and data
storage and retrieval materials (and all copies, compilations and summaries
thereof), equipment, documents, duplicates, notes, drawings, specifications,
research tape or other electronic recordings, programs, data and other materials
or property of any nature belonging to Company or relating to Company Business,
and Executive will not take with Executive or allow a third party to take, any
of the foregoing or any reproduction of any of the foregoing. Company property
includes personal property, made or compiled by Executive, in whole or in part
and alone or with others, or in any way coming into Executive's possession
concerning Company Business or other affairs of Company or any of its
affiliates.
(g) DISCLOSURE AND ASSIGNMENT OF RIGHTS. (i) Executive shall promptly
disclose and assign to Company and its affiliates or its nominee(s), to the
maximum extent permitted by Section 2870 of the California Labor Code, as it may
be hereafter amended from time to time, all right, title and interest of
Executive in and to any and all ideas, inventions, discoveries, secret processes
and methods and improvements, together with any and all patents that may be
issued thereon in the United States and in all foreign countries, which
Executive may invent, develop or improve, or cause to be invented, developed or
improved, during the term of this Agreement or which are (1) conceived and
developed during normal working hours, and (2) related to the scope of Company
Business. As used in this Agreement, the term "invent" includes "make",
"discover", "develop", "manufacture" or "produce", or any of them; "invention"
includes the phrase "any new or useful original art, machine, methods of
manufacture, process, composition of matter, design, or configuration of any
kind"; "improvement" includes "discovery" or "production"; and "patent" includes
"Letters Patent" and "all the extensions, renewals, modifications, improvements
and reissues of such patents".
(ii) Executive shall disclose immediately to duly authorized
representatives of Company any ideas, inventions, discoveries, secret processes
and methods and improvements covered by the provisions of paragraph (i) above,
and execute all documents reasonably required in connection with the application
for an issuance of Letters Patent in the United States and in any foreign
country and the assignment thereof to Company and its affiliates or its
nominee(s).
SECTION 5.02 RIGHTS AND REMEDIES UPON BREACH. If Executive breaches, or
threatens to breach, in any material respect any of the provisions of Section
5.01 hereof ("Restrictive Covenants"), Company shall, in addition to all its
other rights hereunder and under applicable law and in equity, have the right to
seek specific enforcement of the Restrictive Covenants by any court having
jurisdiction, including, without limitation, the granting of a preliminary
injunction which may be granted without the necessity of proving damages or the
posting of a bond or other security, it being acknowledged that any such breach
or threatened breach may cause irreparable injury to Company and that money
damages may not provide an adequate remedy to Company. In addition to and not in
lieu of any other remedy that Company may have pursuant to this Agreement or
otherwise, in the event of any breach of any provision of Section 5.01 during
the period which Executive is entitled to receive payments and benefits pursuant
to Section 4.07, such period shall terminate as of the date of such breach and
Executive shall not
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thereafter be entitled to receive any salary or other payments or benefits under
this Agreement, including, but not limited to, any stock options granted to
Executive.
SECTION 5.03 SEVERABILITY AND MODIFICATION OF COVENANTS. Company and Executive
agree and acknowledge that the duration, scope and geographic area of the
Restrictive Covenants described in this Section 5.01 are fair, reasonable and
necessary in order to protect the good will and other legitimate interests of
Company, that adequate consideration has been received by Executive for such
obligations, and that these obligations do not prevent Executive from earning a
livelihood. If any court of competent jurisdiction determines that any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions. If any court of
competent jurisdiction construes any of the Restrictive Covenants, or any part
thereof, to be unenforceable because of the duration or geographic scope of such
provision or otherwise, such provision shall be deemed amended to the minimum
extent required to make it enforceable and, in its reduced form, such provision
shall then be enforceable and enforced.
VI. CERTAIN AGREEMENTS
SECTION 6.01 (a) CUSTOMERS, SUPPLIERS. Executive does not have, and at any time
during the term of this Agreement shall not have, any employment with or any
direct or indirect interest in (as owner, partner, shareholder, employee,
director, officer, agent, consultant or otherwise) any customer of or supplier
to Company.
(b) CERTAIN ACTIVITIES. Executive during the term of this Agreement
shall not (i) give or agree to give, any gift or similar benefit of more than
nominal value to any customer, supplier, or governmental employee or official or
any other person who is or may be in a position to assist or hinder Company in
connection with any proposed transaction, which gift or similar benefit, if not
given or continued in the future, might adversely affect the business or
prospects of Company, (ii) use any corporate or other funds for unlawful
contributions, payments, gifts or entertainment, (iii) make any unlawful
expenditures relating to political activity to government officials or others,
(iv) establish or maintain any unlawful or unrecorded funds in violation of
Section 30A of the Securities Exchange Act of 1934, as amended, and (v) accept
or receive any unlawful contributions, payments, gifts, or expenditures.
VII. MISCELLANEOUS
SECTION 7.01 NOTICES. Any notice or other communication required or which may be
given hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed or faxed, or sent by certified, registered or express mail,
postage prepaid, and shall be deemed given when so delivered personally,
telegraphed, telexed or faxed, or if mailed, two (2) days after the date of
mailing, as follows:
(i) If to Company, addressed to it at:
InSight Health Services Corp.
4400 MacArthur Boulevard, Suite 800
Newport Beach, CA 92660
Attention: General Counsel
Facsimile No.: (949) 476-0137
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(ii) If to Parent, addressed to it at:
InSight Health Services Holdings Corp.
c/o J.W. Childs Associates, L.P.
One Federal Street, 21st Floor
Boston, MA 02110
Attention: Edward D. Yun
Facsimile No.: (617) 753-1101
with copies to: The Halifax Group, L.L.C.
1133 Connecticut Avenue, N.W., Suite 700
Washington, D.C. 20036
Attention: David Dupree
Facsimile No.: (202) 296-7133
Kaye Scholer LLP
425 Park Avenue
New York, NY 10022
Attention: Stephen C. Koval, Esq.
Facsimile No.: (212) 836-8689
(iii) If to Executive, to the address or facsimile set forth below his
signature hereto. Any party hereto may, by notice to the other, change its
address for receipt of notices hereunder.
SECTION 7.02 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, written or oral, with respect thereto.
SECTION 7.03 WAIVERS AND AMENDMENTS. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, amended, modified, superseded, canceled, renewed or extended,
only by a written instrument signed by Executive, Company and Parent. No waiver
of any provision of this Agreement shall be deemed to be a waiver of any other
provision, whether or not similar. No such waiver shall constitute a continuing
waiver. No delay on the part of either party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of either party of any right, power or privilege hereunder, preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege hereunder.
SECTION 7.04 ASSIGNMENT. This Agreement is personal to Executive, and
Executive's rights and obligations hereunder may not be assigned by Executive.
Company may assign this Agreement and its rights, together with its obligations,
hereunder (i) in connection with any sale, transfer or other disposition of all
or substantially all of its assets or business(s), whether by merger,
consolidation or otherwise; or (ii) to any wholly owned subsidiary of Company,
provided that Company shall remain liable for all of its obligations under this
Agreement.
SECTION 7.05 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
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SECTION 7.06 HEADINGS. The article and section headings in this Agreement are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
SECTION 7.07 NUMBER. Unless the context of this Agreement otherwise requires,
words using the singular or plural number will also include the plural or
singular number.
SECTION 7.08 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York, without regard to any conflicts of law principles thereof
that would call for the application of the laws of any other jurisdiction. Any
action or proceeding seeking to enforce any provision of, or based on any right
arising out of, this Agreement may be brought against either of the parties in
the courts of the State of New York, or if it has or can acquire jurisdiction,
in the United States District Court for the Southern District of New York, and
each of the parties hereby consents to the jurisdiction of such courts (and of
the appropriate appellate courts) in any such action or proceeding and waives
any objection to venue laid therein. Process in any action or proceeding
referred to in the preceding sentence may be served on any party anywhere in the
world, whether within or without the State of New York.
SECTION 7.09 EXPENSES. Should either party institute an action to enforce this
Agreement or any provision hereof, or for damages by reason of any alleged
breach of this Agreement or any provisions hereof, Executive shall be entitled
to receive from Company Executive's reasonable travel and living expenses,
incurred by Executive in connection with preparation for and participation in
any proceeding relating to the action if Executive is the prevailing party or
such portion thereof as the court may award.
SECTION 7.10 EFFECTIVE DATE. This Agreement shall be effective at the Effective
Time (as defined in the Agreement and Plan of Merger, dated as of June 29, 2001,
by and among Parent, JWCH Merger Corp. and Company). Immediately prior to the
Effective Time, Executive's current employment agreement with Company shall be
terminated and be of no further force or effect, and Executive waives any and
all rights he may have under such employment agreement, including any payments
for severance or in respect of a change of control contained therein.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Executive Employment
Agreement as of the date first above written.
COMPANY
INSIGHT HEALTH SERVICES CORP.
By: /s/ Steven T. Plochocki
--------------------------------
Name: Steven T. Plochocki
Title: President & CEO
EXECUTIVE
/s/ Michael A. Boylan
------------------------------------
Name: Michael A. Boylan
Address and Facsimile Number:
1005 Putters Place
------------------------------------
Doylestown, PA 18901
------------------------------------
------------------------------------
------------------------------------
INSIGHT HEALTH SERVICES HOLDINGS CORP.
(solely for the purpose of Section 3.07)
By: /s/ Mark J. Tricolli
--------------------------------
Name: Mark J. Tricolli
Title: Vice President & Secretary
12
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
13
<PAGE>
STOCK OPTION AGREEMENT
AGREEMENT entered into as of the ___ day of ________, 2001 by and between
InSight Health Services Holdings Corp., a Delaware corporation (the "Company"),
and the undersigned employee (the "Employee") of the Company or one of its
subsidiaries.
WHEREAS, the Company desires to grant the Employee a nonqualified stock
option to acquire shares of the Company's common stock, $0.001 par value per
share ("Common Stock"); and
WHEREAS, the Employee desires to accept such option subject to the terms
and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the Company and the Employee,
intending to be legally bound, hereby agree as follows:
1. Grant of Option. As of the Effective Time (as defined in the
Agreement and Plan of Merger, dated as of June 29, 2001, by and among the
Company, JWCH Merger Corp. and InSight Health Services Corp.) (the "Grant
Date"), the Company grants to the Employee a nonqualified stock option (the
"Option") to purchase all (or any part) of _____________ shares of Common Stock
(the "Shares") on the terms and conditions hereinafter set forth. This Option is
not intended to be treated as an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
2. Exercise Price. The exercise price ("Exercise Price") for the Shares
covered by the Option shall be $18.00* per share.
3. Vesting and Exercisability. Twenty percent (20%) of the total Option
set forth in Section 1 shall be available for vesting each fiscal year during
the Company's 2002-2006 fiscal years as follows: (A) twenty-five percent (25%)
of the number of available Options for each such fiscal year shall vest and
become exercisable upon the anniversary of the Grant Date in such fiscal year
and (B) seventy-five percent (75%) of the number of available Options for each
such fiscal year shall vest and become exercisable upon the Company's attainment
of the performance goals set forth on Schedule I attached hereto and
incorporated herein. In the event the Employee is employed by the Company or one
of its subsidiaries at the time a Change in Control (as defined below) occurs,
all of the Options (to the extent not already vested) which are to vest over
time pursuant to clause (A) above shall vest immediately prior to the Change in
Control. Notwithstanding the foregoing, to the extent any of the Options which
may vest pursuant to clause (B) above do not vest in accordance with
----------
* Intended to be the subscription price for all stockholders who subscribe
as of the Effective Time. Currently anticipated to be $18.00 per share.
14
<PAGE>
Schedule I by the eighth (8th) anniversary of the Grant Date, they shall be
deemed to vest on such date.
4. Term of Options.
(a) Each Option shall expire on the tenth anniversary of the Grant
Date, but shall be subject to earlier termination as provided in
subsections (b) and (c) below.
(b) If the Employee is terminated for Cause (as defined in
Schedule II hereto) or voluntarily terminates his employment with the
Company at any time without Good Reason (as defined in Schedule II), the
Option shall terminate on the date of such termination of employment,
whether or not then fully vested and exercisable.
(c) If the Employee is terminated by the Company without Cause,
resigns for Good Reason, dies, or becomes Disabled (as defined in Schedule
II) at any time during the term of his employment by the Company, any
portion of the Option that is not then fully vested and exercisable shall
terminate immediately, provided, however, that the board of directors of
the Company (the "Board") shall have the discretion to vest any portion of
such Employee's Options that have not yet become eligible to vest, and any
such accelerated Options shall be subject to the same terms and conditions
as other Options that have vested pursuant to Section 3. Any portion of
the Option that is vested and exercisable shall terminate on the 120th day
following such termination of employment.
5. Manner of Exercise of Option.
(a) The Employee may exercise any Option that is fully vested and
exercisable by giving written notice to the Company stating the number of
Shares (which shall not be less than 100, unless the total Shares which
are vested and exercisable at such time is less than 100) to be purchased
and accompanied by payment in full of the Exercise Price for such Shares.
Payment shall be either in cash or by a certified or bank cashier's check
or checks payable to the Company.
At any time when Common Stock is registered under Section 12 of the
Securities Exchange Act of 1934, as amended, the Option may also be exercised by
means of a "broker cashless exercise" procedure approved in all respects in
advance by the Board, in which a broker: (i) transmits the Exercise Price for
any Shares to the Company in cash or acceptable cash equivalents, either (1)
against the Employee's notice of exercise and the Company's confirmation that it
will deliver to the broker stock certificates issued in the name of the broker
for at least that number of Shares having a fair market value equal to the
Exercise Price therefor, or (2) as the proceeds of a margin loan to the
Employee; or (ii) agrees to pay the Exercise Price therefor to the Company in
cash or acceptable cash equivalents upon the broker's receipt from the Company
of stock certificates issued in the name of the broker for at least that number
of Shares having a fair market value equal to the Exercise Price therefor. The
Employee's written notice of exercise of the Option pursuant to a "cashless
exercise" procedure must include the
15
<PAGE>
name and address of the broker involved, a clear description of the procedure,
and such other information or undertaking by the broker as the Board shall
reasonably require. If payment is to be made in whole or in part in Shares
underlying the Option, the Employee shall direct the Company to subtract from
the number of Shares underlying the Option, that number of Shares having a fair
market value (as determined in good faith by the Board) equal to the purchase
price (or portion thereof) to be paid with such underlying Shares.
Upon such purchase, delivery of a certificate for paid-up,
non-assessable Shares shall be made at the principal office of the Company to
the Employee (or the person entitled to exercise the Option pursuant to Section
7), not more than 10 days from the date of receipt of the notice by the Company.
(b) The Company shall at all times during the term of the Option
reserve and keep available such number of Shares as will be sufficient to
satisfy the requirements of the Option.
(c) Notwithstanding Section 5(a) of this Agreement, the Company
may delay the issuance of Shares covered by the Option and the delivery of
a certificate for such Shares until one of the following conditions is
satisfied: (i) the Shares purchased pursuant to the Option are at the time
of the issuance of such Shares effectively registered or qualified under
applicable federal and state securities laws or (ii) such Shares are
exempt from registration and qualification under applicable federal and
state securities laws.
6. Administration. This Agreement shall be administered by the Board.
The Board shall be authorized to interpret this Agreement and to make all other
determinations necessary or advisable for the administration of this Agreement.
The determinations of the Board in the administration of this Agreement, as
described herein, shall be final and conclusive. The Secretary shall be
authorized to implement this Agreement in accordance with its terms and to take
such actions of a ministerial nature as shall be necessary to effectuate the
intent and purposes thereof.
7. Non-Transferability. The right of the Employee to exercise the
Option (as and when vested) shall not be assignable or transferable by the
Employee otherwise than by will or the laws of descent and distribution, and
such Shares may be purchased during the lifetime of the Employee only by him (or
his legal representative in the event that he is Disabled). Any other such
transfer shall be null and void and without effect upon any attempted assignment
or transfer, except as hereinabove provided, including without limitation any
purported assignment, whether voluntary or by operation of law, pledge,
hypothecation or other disposition contrary to the provisions hereof, or levy of
execution, attachment, trustee process or similar process, whether legal or
equitable, upon the Option.
8. Representation Letter and Investment Legend.
(a) In the event that for any reason the Shares to be issued upon
exercise of a vested Option shall not be effectively registered under the
Securities Act of
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<PAGE>
1933, as amended (the "1933 Act"), upon any date on which the Option is
exercised, the Employee (or the person exercising the Option pursuant to
Section 7) shall give a written representation to the Company in the form
attached hereto as Exhibit A, and the Company shall place the legend
described on Exhibit A, upon any certificate for the Shares issued by
reason of such exercise.
(b) The Company shall be under no obligation to qualify Shares or
to cause a registration statement or a post-effective amendment to any
registration statement to be prepared for the purposes of covering the
issue of Shares; provided, that the Company will use its reasonable best
efforts to comply with any available exemption from registration and
qualification of the Shares under applicable federal and state securities
laws.
9. Adjustments upon Changes in Capitalization.
(a) In the event that the outstanding shares of the Common Stock
of the Company are changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another
corporation by reason of any reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination of shares,
or dividends payable in capital stock, appropriate adjustment shall be
made in the number and kind of Shares, and the Exercise Price therefor, as
to which the Option, to the extent not theretofore exercised, shall be
exercisable.
In addition, unless otherwise determined by the Board in its sole
discretion, in the case of a Change in Control (as hereinafter defined) of the
Company, the purchaser(s) of the Company's assets or stock may, in his, her or
its discretion, deliver to the Employee, to the extent that the right to
purchase Shares under the Option has vested, the same kind of consideration (net
of the Exercise Price for such Shares) that is delivered to the stockholders of
the Company as a result of the Change in Control, or the Board may, in its sole
determination, cancel the Option, to the extent not theretofore exercised, in
exchange for consideration in cash or in kind, which consideration in either
case shall be equal in value to the value of those shares of stock or other
consideration the Employee would have received had the Option been exercised (to
the extent it has vested and not been exercised) and no disposition of the
shares acquired upon such exercise been made prior to the Change in Control,
less the Exercise Price therefor. Upon receipt of such consideration by the
Employee, the Option shall immediately terminate and be of no further force and
effect, with respect to both vested and nonvested portions thereof. The value of
the stock or other securities the Employee would have received if the Option had
been exercised shall be determined in good faith by the Board. In addition, in
the case of a Change in Control, the Board may, in its sole discretion,
accelerate the vesting of all or any portion of the Option that would remain
unvested after the application of the accelerated vesting on Schedule I and
Section 3 hereto. A "Change in Control" shall be deemed to have occurred if (i)
any person, or any two or more persons acting as a group, and all affiliates of
such person or persons (a "Group") who prior to such time beneficially owned
less than 50% of the then outstanding capital stock of the Company shall acquire
shares of the Company's capital stock in one or more transactions or series of
transactions, including by merger, and after such transaction or transactions
such person or Group and affiliates beneficially own 50% or more of the
Company's
17
<PAGE>
outstanding capital stock, or (ii) the Company shall sell all or substantially
all of its assets to any Group which, immediately prior to the time of such
transaction, beneficially owned less than 50% of the then outstanding capital
stock of the Company.
(b) Upon dissolution or liquidation of the Company, the Option
shall terminate, but the Employee shall have the right, immediately prior
to such dissolution or liquidation, to exercise any then vested Options.
(c) No fraction of a share of Common Stock shall be purchasable or
deliverable upon the exercise of the Option, but in the event any
adjustment hereunder of the number of shares covered by the Option shall
cause such number to include a fraction of a share, such fraction shall be
adjusted to the nearest smaller whole number of shares.
10. No Special Employment Rights. Nothing contained in this Agreement
shall be construed or deemed by any person under any circumstances to bind the
Company or any of its subsidiaries to continue the employment of the Employee
for the period within which this Option may vest or for any other period.
11. Rights as a Stockholder. The Employee shall have no rights as a
stockholder with respect to any Shares which may be purchased upon the vesting
of this Option unless and until a certificate or certificates representing such
Shares are duly issued and delivered to the Employee. Except as otherwise
expressly provided herein, no adjustment shall be made for dividends or other
rights for which the record date is prior to the date the stock certificate is
issued.
12. Withholding Taxes. The Employee hereby agrees, as a condition to any
exercise of the Option, to provide to the Company an amount sufficient to
satisfy its obligation to withhold certain federal, state and local taxes
arising by reason of such exercise (the "Withholding Amount"), if any, by (a)
authorizing the Company to withhold the Withholding Amount from his cash
compensation, or (b) remitting the Withholding Amount to the Company in cash;
provided that, to the extent that the Withholding Amount is not provided by one
or a combination of such methods, the Company may at its election withhold from
the Shares delivered upon exercise of the Option that number of Shares having a
fair market value (in the good faith judgment of the Board) equal to the
Withholding Amount.
13. Execution of Stockholders' Agreement. The Employee acknowledges that
he has previously executed and delivered the stockholders agreement by and among
the Company and the stockholders of the Company named therein (the "Stockholders
Agreement"). The Employee further agrees that this Agreement, the Option and all
Shares acquired by him upon exercise of the Option will be subject to the terms
and conditions of the Stockholders Agreement, as the same may have been amended
or modified in accordance with its terms.
14. Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, without regard to any conflicts of law principles thereof
that would call for the application of the laws of any other jurisdiction. Any
action or proceeding seeking to enforce any provision of, or based on any right
arising out of, this Agreement may be brought against
18
<PAGE>
either of the parties in the courts of the State of Delaware, or if it has or
can acquire jurisdiction, in the United States District Court for the District
of Delaware, and each of the parties hereby consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world, whether within or without the State of Delaware.
* * * * * * * * *
[Signatures on Following Page]
19
<PAGE>
STOCK OPTION AGREEMENT
Counterpart Signature Page
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed,
by its officer thereunto duly authorized, and the Employee has executed this
Agreement, all as of the day and year first above written.
INSIGHT HEALTH SERVICES HOLDINGS CORP. EMPLOYEE
BY: BY:
--------------------------------- ---------------------------------
Name: Name:
Title: Address:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
Telecopier Number:
------------------
Social Security Number:
-------------
20
<PAGE>
SCHEDULE I
OPTION PERFORMANCE VESTING SCHEDULE
(a) For each of the Company's fiscal years ending June 30 in the years
2002 through 2006, the portion of the total Option described in clause (B) of
Section 3 of the Agreement shall vest and become exercisable if the Company
achieves a return on equity ("ROE") for such year that equals or exceeds the
following Base Targets:
Base Target 90% of Base Target
----------- ------------------
2002 1.11 1.00
2003 2.40 2.16
2004 3.50 3.15
2005 5.00 4.50
2006 6.50 5.85
If the Company achieves more than 90% but less than 100% of the Base Target ROE
in any fiscal year, the Options available to vest in that year shall vest in the
ratio by which ROE achieved exceeds 90% of Base Target ROE for such fiscal year
(i.e., for ROE of 90.5% of Base Target ROE, one-twentieth of the available
Options would vest; for ROE of 96%, six-tenths of the available Options would
vest).
For purposes hereof, ROE for any fiscal year shall be calculated by the
following formula: [(5.25 x EBITDA) - D+C]/TE where
D = the Company's Consolidated Indebtedness at fiscal year-end
(or at time of sale of the Company)
C = the Company's Excess Cash at fiscal year-end (or at time of
sale of the Company)
TE = total equity invested as of the Effective Time (including
the net pre-tax value of any options rolled over as of the
Effective Time)
EBITDA = EBITDA for such fiscal year
If TE is increased at any time after the Effective Time and during the
Company's fiscal years ending on June 30 in the years 2002 through 2006, the
Board, in good faith, shall adjust the Base Targets. The Options available for
vesting shall vest, if the Targets are met, upon completion of the audit for the
Company and its subsidiaries' consolidated financial statements for such fiscal
year.
(b) Notwithstanding the foregoing, if in the fiscal year ending June 30,
2006, (1) the percentage of Options available to vest that do vest exceeds (2)
the cumulative percentage of Options available to vest in the fiscal years
ending June 30 in the years 2002-2005 that did vest in those years, the vesting
percentage achieved in fiscal year ending June 30, 2006 shall be
SCHEDULE I-1
<PAGE>
carried back to the fiscal years ending June 30 in the years 2002-2005 and
applied to the Options available to vest in those fiscal years. The number of
vested Options for the fiscal years ending on June 30 in the years 2002 through
2005 shall be adjusted to reflect such higher percentage.
(c) (1) In the event a Change in Control of the Company occurs before the
end of the fiscal year ending June 30, 2006, the Base Target for the year in
which the Change in Control occurs and the above formula will be modified as
follows:
- the Base Target for such year will be adjusted to be an amount
determined by adding to the Base Target for the fiscal year immediately prior to
the fiscal year in which the Change in Control occurs an amount equal to the
product of (i) a fraction the numerator of which is the number of days that
elapsed since the first day of the fiscal year in which the Change in Control
occurs until the date of the consummation of the Change in Control and the
denominator of which is 365 and (ii) the difference between the Base Target for
the year in which the Change in Control occurs and the Base Target for the
immediately preceding fiscal year.
- the formula for determining ROE at the time of the Change in
Control will be adjusted by using EBITDA for the 12 full calendar months
immediately preceding the date of the Change in Control so that the multiple of
EBITDA used will be the greater of 5.25 and the multiple used in determining the
Company's enterprise value in the Change in Control.
(2) The percentage of Options that vest in accordance with the formula as
so modified will then be applied to fiscal years preceding and following the
year in which the Change in Control occurs and the number of vested Options
shall be adjusted to reflect such percentage; provided that, if the cumulative
percentage of Options that vested in the fiscal years preceding the Change in
Control exceeds the percentage that vest in the fiscal year of the Change in
Control pursuant to the modified formula, the cumulative percentage of Options
that vested prior to the Change in Control will instead be applied to the fiscal
years that follow the Change in Control.
(d) Notwithstanding the foregoing, in the event J.W. Childs Equity
Partners II, L.P., Halifax Capital Partners, L.P. and their respective
affiliates each receive a net cash return on their total investment in the
Company resulting (i) in an internal rate of return of at least 35% on their
total investment in the Company and (ii) in an amount of cash equal to at least
three times their respective total investment in the Company, then one-third of
the total Options described in clause (B) of Section 3 of the Agreement (i.e.,
25% of the total Option set forth in Section 1 of the Agreement) shall vest and
become exercisable. This vesting provision is not intended to be additive to the
preceding provisions, but is intended to be in the alternative.
For purposes of this Schedule I, the following terms have the following
meanings:
"Consolidated Indebtedness" shall mean, as of any date, the aggregate
amount outstanding, on a consolidated basis, of (a) all obligations of the
Company or its subsidiaries for borrowed money, (b) all obligations of the
Company or its subsidiaries evidenced by bonds, debentures, notes or other
similar instruments or upon which interest charges are customarily paid, (c) all
obligations of the Company or its subsidiaries for the deferred purchase price
of property or services, except current accounts payable arising in the ordinary
course of business
SCHEDULE I-2
<PAGE>
and not overdue beyond such period as is commercially reasonable for the Company
or its subsidiaries' business, (d) all obligations of the Company or its
subsidiaries under conditional sale or other title retention agreements relating
to property purchased by such Person and all capitalized lease obligations, (e)
all payment obligations of the Company or its subsidiaries on or for currency
protection agreements, (f) all obligations of the Company or its subsidiaries as
an account party under any letter of credit (excluding those supporting trade
payables), (g) all obligations of any third party secured by property or assets
of the Company or its subsidiaries (regardless of whether or not such Person is
liable for repayment of such obligations) and (h) all guarantees of the Company
or its subsidiaries.
"EBITDA" shall mean consolidated earnings of the Company and its
subsidiaries, including equity in the earnings from non-consolidated
subsidiaries, before interest, taxes, depreciation, amortization and the
management fees paid to J.W. Childs Associates, L.P. and The Halifax Group,
L.L.C. or any of their respective affiliates and after deduction of all
operating expenses, minority interest expenses and incentive compensation, all
as calculated in accordance with generally accepted accounting principles
consistently applied, as reflected in the Company's consolidated financial
statements. For purposes of calculating EBITDA, upon the Company making an
acquisition or disposition of any assets or business, the Board, in good faith,
shall adjust EBITDA for any fiscal year to include or exclude on a pro forma
basis, as applicable, the EBITDA for such assets or business for the period of
time the assets or business are not owned by the Company for the fiscal year in
which the assets or business are acquired or sold.
"Excess Cash" shall mean cash in excess of the Company and its
subsidiaries' operating needs, in the good faith judgment of the Board.
SCHEDULE I-3
<PAGE>
SCHEDULE II
Definitions Applicable to
Stock Option Agreement
1. "Cause," with respect to the Employee, shall have the meaning
attributed to it under the executed written employment agreement between the
Employee and the Company (or a subsidiary thereof) or, in the absence of such
employment agreement, "Cause" shall mean the occurrence of any of the following
during the term of the Employee's employment with the Company (or a subsidiary
thereof):
(a) the Employee has performed his/her duties negligently;
(b) the Employee is guilty of misconduct in connection with
the performance of the Employee's duties;
(c) the Employee has committed any serious crime or offense;
(d) the Employee has failed or refused to comply with the
oral or written policies or directives of the Board of Directors; or
(e) the Employee has breached any provision or covenant
contained in this Agreement.
2. "Disabled," with respect to the Employee, shall have the meaning
attributed to it under the executed written employment agreement between the
Employee and the Company (or a subsidiary thereof) or, in the absence of such
employment agreement, the Employee shall be deemed to have become "Disabled" if,
during the term of the Employee's employment with the Company (or a subsidiary
thereof), the Employee shall become physically or mentally disabled, whether
totally or partially, either permanently or so that the Employee, in the good
faith judgment of the Board, is unable substantially and competently to perform
his duties on behalf of the Company (or a subsidiary thereof) for a period of 90
consecutive days or for 90 days during any six month period during the said term
of employment. In order to assist the Board in making that determination, the
Employee shall, as reasonably requested by the Board, (i) make himself available
for medical examinations by one or more physicians chosen by the Board and (ii)
grant to the Board and any such physicians access to all relevant medical
information concerning him, arrange to furnish copies of his medical records to
the Board and use his best efforts to cause his own physicians to be available
to discuss his health with the Board.
3. "Good Reason," with respect to the Employee, shall have the meaning
attributed to it under the executed written employment agreement between the
Employee and the Company (or a subsidiary thereof) or, in the absence of such
employment agreement, "Good Reason" shall be deemed to have occurred if, other
than for Cause, any of the following has occurred during the term of the
Employee's employment with the Company (or a subsidiary thereof):
(a) the Employee's base salary has been reduced, other than
in connection with a reduction of executive compensation imposed by the
Board in response
SCHEDULE II-1
<PAGE>
to negative financial results or other adverse circumstances affecting the
Company or its subsidiaries; or
(b) the Company has reduced or reassigned, in any material
respect, the duties of the Employee as an employee of the Company (or a
subsidiary thereof) and such event has not been rescinded within 10
business days after the Employee notifies the Company (or a subsidiary
thereof) in writing that he objects thereto.
4. "Person" shall mean an individual, corporation, partnership, limited
liability company, trust, unincorporated association, government or any agency
or political subdivision thereof, or any other entity.
SCHEDULE II-2
<PAGE>
EXHIBIT A
TO STOCK OPTION AGREEMENT
Gentlemen:
In connection with the purchase by me of ___________________ shares of
common stock, $0.001 par value per share, of InSight Health Services Holdings
Corp., a Delaware corporation (the "Company") under the nonqualified stock
option granted to me pursuant to that certain Stock Option Agreement dated as of
June ____, 2001 (the "Option Agreement"), I hereby acknowledge that I have been
informed as follows:
EXHIBIT A-1
<PAGE>
1. The shares of common stock of the Company to be issued to me upon
exercise of said option have not been registered under the Securities Act of
1933, as amended (the "Act"), and accordingly, must be held indefinitely unless
such shares are subsequently registered under the Act, or an exemption from such
registration is available.
2. Routine sales of securities made in reliance upon Rule 144 under the
Act can be made only after the holding period and in limited amounts in
accordance with the terms and conditions provided by that Rule, and with respect
to which that Rule is not applicable, registration or compliance with some other
exemption under the Act will be required.
3. The Company is under no obligation to me to register the shares or
to comply with any such exemptions under the Act, other than as set forth in the
Stockholders' Agreement referenced and defined in paragraph 13 of the Option
Agreement (the "Stockholders Agreement").
4. The availability of Rule 144 is dependent upon adequate current
public information with respect to the Company being available and, at the time
that I may desire to make a sale pursuant to the Rule, the Company may neither
wish nor be able to comply with such requirement.
5. The shares of common stock of the Company to be issued to me upon
the exercise of said option are subject to the terms and conditions, including
restrictions on transfer, of the Stockholders Agreement.
In consideration of the issuance of certificates for the shares to me, I
hereby represent and warrant that I am acquiring such shares for my own account
for investment, and that I will not sell, pledge, hypothecate or otherwise
transfer such shares in the absence of an effective registration statement
covering the same, except as permitted by an applicable exemption under the Act.
In view of this representation and warranty, I agree that there may be affixed
to the certificates for the shares to be issued to me, and to all certificates
issued hereafter representing such shares (until in the opinion of counsel,
which opinion must be reasonably satisfactory in form and substance to counsel
for the Company, it is no longer necessary or required) a legend as follows:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), and may not be
sold, transferred, offered for sale, pledged or hypothecated in the
absence of an effective registration statement as to the securities under
the Act or an opinion of counsel satisfactory to the Company and its
counsel that such registration is not required."
"The securities represented by this certificate are subject to the terms
and conditions, including restrictions on transfer, of a Stockholders'
Agreement among the Company and its stockholders dated as of ____________,
as amended from time to time, a copy of which is on file at the principal
office of the Company."
EXHIBIT A-2
<PAGE>
I further agree that the Company may place a stop order with its transfer
agent, prohibiting the transfer of such shares, so long as the legend remains on
the certificates representing the shares.
I hereby represent and warrant that: My financial situation is such that I
can afford to bear the economic risk of holding the shares issued to me upon
exercise of said option for an indefinite period of time, I have no need for
liquidity with respect to my investment and have adequate means to provide for
my current needs and personal contingencies, and can afford to suffer the
complete loss of my investment in such shares.
(a) I am an "accredited investor" within the meaning of Rule
501 under the Act and I, either alone or with my purchaser representative
(as such term is defined in Rule 501 under the Act) have such knowledge
and experience in financial and business matters that I am capable of
evaluating the merits and risks of my investment in the shares issued to
me upon exercise of said option.
(b) I have been afforded the opportunity to ask questions
of, and to receive answers from, the Company and its representatives
concerning the shares issued to me upon exercise of said option and to
obtain any additional information I have deemed necessary.
(c) I have a high degree of familiarity with the business,
operations, financial condition and prospects of the Company.
Very truly yours,
-------------------------
[Employee]
EXHIBIT A-3